Uncover Extent of Public Desire for Bank-Like Relationships with Large Enterprises
Technology is unlocking large enterprise potential at an unparalleled rate, and the consequences extend well beyond the confines of traditional industry segments. The distinction between retailers, tech companies, financial institutions, and multiple other economic classifications is increasingly meaningless when it comes to organizations with nine-plus figure market capitalizations. Cloud infrastructure, mobile phones, and the increasing interconnectivity between traditionally siloed activities mean that companies with vast resources are positioned to quickly pivot into new industries and emerging markets.
Companies like Apple, Amazon, and Google are now better positioned to assess important information about consumer behavior and credit rating than other organizations across financial services, insurance, and even government institutions. This is a huge upper hand that is causing concern amongst regulators and industry experts about the future of competition within the industry.
This disruption from BigTech coincides with a market landscape where consumer relationships with large enterprises are highly dynamic. As innovation continues to occur at a rapid pace, incumbent banks, large enterprises, and capital-infused startups need to be aware of current consumer trends, particularly when it comes to financial service relationships.
In order to shed more light on this situation, the team at Optherium Labs recently conducted an in-depth consumer survey. Through extensive interaction with thousands of consumers and thorough analysis of results, we have collected key information and insights on the evolving consumer finance landscape. But before analyzing the results, it’s important that industry stakeholders understand the current state of consumer-enterprise interactions.
Consumer Relationships with Large Enterprise
How and why a customer chooses to form a relationship with large companies is a complex process, especially when it comes to one based on financial services. Here are some of the main factors influencing how these interactions play out in the current market landscape.
Multiple Enterprise Relationships
The number of large enterprise companies that consumers interact with continues to grow. Around 90% of people have a financial relationship with at least one large organization, and the average number of connections sits at more than a dozen. Between employers, retailers, telecom providers, financial institutions, tech companies, and utilities, consumers now have a vast network of financial relationships with service providers across different industries. A decline in customer loyalty also means there is lots of lateral movement between different providers as people continue to seek out the best experience.
Suboptimal Interactions
Historically, consumers have a difficult time achieving optimal relationships with their large enterprise arrangements, whether it be financial services, health club memberships, or telephone plans. There are multiple individuals and organizational factors that mediate the success of consumer interaction with enterprise financial products. From product framing and marketing to consumer bias and inertia to predatory lending, the financial services industry has traditionally been a difficult one to achieve success in, even when partnering with industry-leading firms.
Digital Disruption
Following in the footsteps of FinTech firms, the BigTech titans and other capital-heavy companies are poised to further disrupt the financial services industry. Amongst a consumer base with increasing digital capabilities, financial institutions, neobanks, and large tech companies now have the ability to offer remote services and financial platforms. Online-only banking and novel investment platforms are emerging to improve convenience and make products more accessible. In addition to increasing competition within the financial services sector, these developments are also changing consumer expectations and BigTech has the resources to address these needs.
Optherium and PYMNTS.com Consumer Report
In a joint effort to determine the state of the market for bank-like relationships between consumers and large enterprises, Optherium Labs recently partnered with PYMNTS to carry out a consumer study. While this specific consumer segment has yet to receive widespread attention, the body of research discussed above suggests that the likelihood of consumers forming a financial relationship with BigTech and other enterprise firms is high.
After response collection and elimination of unusable submissions, 2,225 valid survey results remain with an average time-to-completion of nearly eight and a half minutes. Extensive analysis of these responses reveals that consumers across income brackets, education levels, and other demographics are increasingly ready to adopt innovative financial service solutions.
Key Findings
In addition to supporting the hypothesis of consumer interest in further increasing the digitization of financial service delivery at the enterprise level, analysis of the survey data also reveals the following trends.
Large Enterprises are Missing Out in a Big Way
1 While enterprise companies are consistently adopting novel tech solutions, survey responses suggest that service delivery is not yet up to customer expectations — and this does not just pertain to financial institutions.
Nearly a third of consumers are very interested in receiving banking services from enterprise retailers, telecom providers, and tech companies. That number jumps to 42% when it comes to receiving online financial services from employers.
Overall, half of the consumers express interest in receiving financial services from non-bank enterprises. Of the companies, Apple and Amazon emerge as the most likely candidates due to their high brand credibility and trust.
Consumer Choice is Driven by Trust and Convenience
2 Of the potential factors influencing consumer decisions to form a financial relationship with a large, nonbank enterprise, trust is among the frontrunners. In fact, 25% of consumers report it as their top factor. This is why companies like Apple, Amazon, Bank of America, and JP Morgan consistently rank as the top financial and BigTech institutions when it comes to consumer financial partnerships.
Unfortunately, 41% and 47% of consumers list data breaches and fraud risks respectively as the top reasons to avoid banking services offered by large companies. This signals conflicting views on the level of trust for these entities that may be responsible for depressing consumer demand.
In addition to trust, convenience is also a leading factor for consumer engagement in a financial services relationship. 51% of consumers interested in using banking services from an industry outsider report convenience as the main reason.
A New Standard is Emerging
3 The number of consumers who rely primarily on mobile and web platforms for banking is four times greater than the cohort that manages their accounts at a physical location and 82% of all consumers use digital means to achieve their financial needs.
Because of this preference for online activity, people also expect their financial service providers to bridge the aforementioned gap between convenience and security. Consumers are increasingly looking for enterprises that provide financial services remotely and securely, and are even willing to engage with nonbanking enterprises to meet these needs.
Enterprise Employers Emerge as a Strong Candidate
4 Understandably, the consumer preference for digital-only financial service providers remains with the established banks. 43% of consumers report interest in receiving this type of service from their existing bank, while 30% express interest in partnering with a competing large bank. But another strong candidate for online-only banking is emerging.
41% of consumers show interest in developing a digital-only financial service arrangement with their employer. This is especially true for those in the Millenial and Gen Z cohorts. Consumer interest in this type of service arrangement is also strong for large enterprises in the retail (28%), telecom (27%), tech (27%), and utility/cable (24.4%) industries.
Industry Implications
These key findings from the Optherium-PYMNTS study are crucial for all enterprises with skin in the game — whether it’s a large enterprise, incumbent financial institution, or growing business. The dividing lines between retail, tech, telecom, and finance are blurring and executive stakeholders need to be aware of this. The possibilities when it comes to financial service providers are numerous in this new landscape and companies need to take advantage.
Medium and Large Enterprise
Regardless of the specific industries, capable enterprises are now able to use their internal and external connections to provide tailored financial services. Consumers are increasingly interested in forming digital-only banking services with non-bank institutions, particularly when it comes to their employees. Corporate wallets and savings accounts not only offer the Millennial and Gen Z workforce the convenience they desire, but it also allows companies to reduce costs and earn extra income.
Incumbent Banks and Financial Institutions
For the banks and financial institutions that already have systems in place for physical and digital services, the development of digital-only accounts offers the perfect way to cut costs and stay ahead of competitors. Younger generations are increasingly looking for convenient service provision that still offers all the functions of traditional accounts and complete digitization of delivery is the perfect way to offer this. For those consumers who are concerned about security in the online world, innovative use of blockchain and other technologies is quickly turning digital-only banking into one of the safest ways to receive financial services.
Capital-Infused Startups
Even small and growing players now have the chance to snatch up market share thanks to this prevalent consumer interest in novel financial service relationships. The neobank movement is growing and, with the proper implementation of digital-only banking infrastructure, growing companies and startups can bypass less versatile organizations to meet the new standard of financial service delivery. Despite widespread competition, the data shows that large consumer segments are increasingly interested in exploring novel service relationships with convenient, user-experience-driven companies.
While the struggle for dominance in the realm of digital financial services and neobanking is just getting underway, it’s clear that consumer sentiment warrants enterprise investment into these capabilities. Brand loyalty and the delineation between different service industries are continuing to decline in the tech era, leaving all resource-heavy enterprises with the ability to capitalize on a new consumer base. Now it’s just a question of taking the right steps to implement a neobanking solution.
If you’re interested in learning more about the world of neobanking or securing data with blockchain or to download the Optherium-PYMNTS Consumer Survey, reach out to the team at Optherium Labs today!
